International tax law is not what you see on the internet or on television.
What is international tax law? Well, it is not the methods used on the Panama Papers and the Paradise Papers
Many if not most of those folks were hiding assets and illegally avoiding taxes.
International tax law for small business is unique.
Small businesses are fast moving. Their tax strategy must be able to keep up with the fast pace of today’s business.
International Tax Law allows legal tax advantages intended by Congress.
We have heard how General Electric pays little U.S. taxes. Other firms that are in the news are Apple and Google. All of the firms in the news are owned by the public. Their tax savings help increase the value of their stock.
To continue their tax savings, they must keep this wealth created outside the U.S. in foreign countries. They can do this forever since they are owned by the public and the corporation owner never dies,
Small business owners use a very different set of international tax laws than publically traded companies. What you read on the internet does not apply to the privately owned business.
Unlike a publically traded company, the small business tax plan includes the retirement of the owner or the owner’s death. While legally avoiding taxes allow the small business to grow faster and create more wealth, eventually the owner or his heirs will dissolve the entity.
The long term tax plan for the small business looks at:
1. the growth period of the business
2. the innovation needed to stay competitive (you don’t want to do a “BlockBuster”
3. withdrawing assets to either the retired owner or his (or her) heirs.
International tax strategies include both international tax laws and a hidden tax law called “common law”.
For example, HP has a fantastic tax division with brilliant international tax CPAs and international tax attorneys. Yet, one of their international tax plans failed and failed big (more on this link). The tax planners ignore the common law of “debt versus equity”.
Get information on the fundamentals of international tax law on this link.
Other international tax plans fail on the “economic substance” common law. I have more on this law below in an episode of my tax talk podcast.